Are Asian Economies in a Position to Benefit From The Age of Trump’s Tariffs?

President Trump’s aggressive stance on tariffs, which has sparked a trade war with China, may pave the way for more unification in Southeast Asia and a greater level of economic resilience.

It seems as though Donald Trump’s Presidency has been action-packed since day one. The announcement of sweeping global tariffs on April 2, 2025, in what Trump declared ‘Liberation Day’, rocked Asian economies and drew varied responses from affected nations.

Tellingly, China swiftly retaliated to the imposition of 34% tariffs, prompting Trump to announce an increased tariff on imports from Asia’s biggest economy to 125% while the Chinese government hiked its own tariffs to 84%.

China’s strong stance on US tariffs appears to point to the nation’s strong hand to play in strengthening its own trade empire while other countries are priced out of dealing with the United States.

Given that White House press secretary Karoline Leavitt called Trump’s stance on tariffs ‘the Art of the Deal’ in reference to the President’s ghostwritten book on business negotiations, it appears that the tariffs were designed to shock trading partners into negotiating historically higher but more favorable tariffs. However, this game of brinkmanship may well help to strengthen Southeast Asia’s economic strength by building more strategic trade relationships.

Fear and Relief

Southeast Asian stocks were initially left reeling following the announcement of tariffs by President Trump, with Hong Kong’s Hang Seng plummeting more than 13%, while the Shanghai Composite and Japan’s Nikkei 225 fell 8% and 7.8%, respectively.

However, the pain was short-lived, and the subsequent 90-day pause on the imposition of tariffs saw Japan lead the way, with the Nikkei 225 closing 9.13% higher off the back of Trump’s change of heart.

Although China’s 125% tariffs remain in place, the majority of Southeast Asia has been granted a short-term reprieve. Despite this, many nations within the region have drawn up contingency plans to counter the threat of barriers to trade.

Japan has long been a strong trading partner with the United States, and the threat of 24% tariffs have prompted Prime Minister Shigeru Ishiba to send a team to the US to negotiate a deal.

With Japan’s automobile sector forming 20% of the nation’s total exports, the industry could lose $17 billion in export potential due to Trump’s additional 25% levies on auto imports.

South Korea quickly announced a $2 billion emergency support package in a bid to protect its automotive industry in the wake of the President’s 25% duty on Korean goods.

With US government officials confirming that talks with Korea have been scheduled, it’s clear that some of Asia’s largest economies are opting against China’s strategy of retaliation.

Choosing Sides

Although China has been most heavily impacted by the rollout of tariffs during Trump 2.0, we may yet see the nation benefit from strengthened trading relationships throughout Asia as a result of the barriers to trade imposed by the United States.

While many Southeast Asian nations have avoided choosing sides between the US and China, their respective hands may be forced by the clouded geopolitical landscape.

In recent years, trading nations like Vietnam and Malasia have even found some prosperity off the back of tensions between the two powerhouse countries, with manufacturers opting to diversify away from China to maintain their US market access.

According to Ben Bland, director of the Asia-Pacific programme at Chatham House, Xi Jinping, the General Secretary of the Chinese Communist Party, could use upcoming visits to Cambodia, Malaysia, and Vietnam to build stronger economic ties with Southeast Asian nations while pointing to tariff uncertainty as a major bargaining chip.

The Push for Prosperity

Jason Pang of JPMorgan Asset Management believes that there’s a growing impetus for interest rate cuts throughout Asian nations as government bonds record higher inflows among safe haven investors.

With lending rates in China already lower than many Western economies at 3.1%, we could see more international players favor the nation as a more attractive place to do business with advantageous borrowing costs and an economic stimulus geared towards growth.

Should the United States uphold its global tariffs following its 90-day pause, the inflationary impact of higher trading costs could threaten higher interest rates while improving the appeal of China as a more attractive trading partner.

Given that China has already unveiled a series of stimulus packages geared towards driving an economic recovery, and considering that more stimulus packages are already being discussed in response to tariff uncertainty, trading partners may also find value in the nation’s commitment to recapturing its post-pandemic prosperity.

Strength Amid Uncertainty

The economic outlook for Southeast Asian economies has become progressively more clouded off the back of tariff uncertainty and the unpredictability of President Donald Trump in the United States.

However, China’s retaliatory measures point to Xi Jinping identifying an opportunity to consolidate trading partners throughout the continent to strengthen Asian economies without reliance on the United States.

At a time when the region is counting the cost of sweeping tariffs, we may see Southeast Asia strengthen trading relationships in a way that ensures more regional prosperity.